Intel Capital and Blackstone to reduce stake in FINO PayTech to comply with payment bank guidelines

FINO PayTech’s foreign investors will reduce their stakes in the company to enable it to meet regulations stipulated for operating a payments bank.Shilpy Sinha | ET Bureau | August 24, 2015, 08:53 IST

It is financial inclusion solutions and services company.FINO PayTech’s foreign investors such as Blackstone Group and Intel Capital will reduce their stakes in the company to enable it to meet regulations stipulated for operating a payments bank.

Blackstone owns about 20% of the company, while Intel Capital, Headland Capital Partners and World Bank’s International Finance Corporation (IFC) hold 15% each. Its total foreign shareholding is around 70%.

According to the eligibility conditions laid out by the Reserve Bank of India (RBI), operators of payments banks have to be Indian-owned and controlled, with a maximum foreign holding of 49%. The selected applicants have a year-and-a-half to meet the conditions et by the RBI and only after that will they get full licences.

“We will have to bring down at least 21% foreign shareholding either by way of fresh issuance of shares or existing investors selling proportionally or exiting completely,” said FINO PayTech’s vice-president Shailesh Pandey. “All options are on table. In the next month we will give out the mandate.”

ICICI Bank and ICICI Lombard own around 15% of the company. Its other shareholders are Corporation Bank, Union Bank, Indian Bank and Life Insurance Corporation. This is the first taste of RBI’s regulation for smaller financial services firms, which aspire to be banks. Banking rules stipulate that no shareholder owns more than a 10% stake in a bank.

FINO PayTech was formed in 2006 after getting an RBI licence to operate as a business correspondent of banks. It now operates the widest network of business correspondents, who help banks provide services in rural areas where they don’t have branches. It generated Rs 300 crore of revenue last year and has been profitable for three years.

Around one-third of its revenue comes from remittance and micro-lending business, while the rest is through serving banks and insurance. It has a share capital of Rs 300 crore.

Payments banks are allowed to accept deposits of up to Rs 1 lakh, provide payments and remittance services, issue debit card and distribute third-party financial products. They are not allowed to lend or issue credit cards. The company intends to invest around Rs 300 crore and will look to break even in the new service in three years, it said after getting the in-principle licence.